Developer Guarantee Fund – what changes will it bring to the property market

Ten post dostępny jest także w języku: polski

Work on a draft law on the protection of the rights of purchasers of residential premises or single-family houses and the Developer Guarantee Fund has been going on for many years. Last week the draft was approved by the Council of Ministers. The topic is very well known in the real estate industry. What does it mean in practice and what changes does it bring for developers and flat buyers?

The main assumption of the Act is to increase the security of persons purchasing a flat from a developer in the event of his bankruptcy. Tomasz Chróstny, President of the Office of Competition and Consumer Protection (UOKiK), claims that the existing protection of funds paid by the purchaser of a flat does not provide an adequate level of security. To increase it, the government wants to establish a Developer Guarantee Fund. Thanks to such a solution, a person who has bought an apartment from a bankrupt developer will receive money collected by this institution.

What does it mean for developers? The aforementioned fund will be funded by contributions paid by investors on funds contributed by clients to purchase a flat. It will be 2% (in the case of open trust accounts) or 0.2%, in the case of closed accounts – from the value of the flat. The contribution is de facto an additional tax on developers, which in the long run may influence higher housing prices. The total revenue to the DFG may amount up to PLN 1.5 billion annually. The real amount of the contribution will be determined by the regulation, so we have to take into account that it may be higher. Interestingly, in recent years, after trust accounts were introduced, we have not heard about any bankruptcies of developers, which allows us to conclude that the scale of the problem is minimal and clients’ money is safe. The new tax is a potential price increase, which is not necessary and not fully justified.

The law also provides for a situation in which the buyer of a new flat will be able to refuse to accept it due to significant defects in the premises. In order to make this possible, it is necessary to create a single binding procedure for acceptance of flats, which must be adequately specified. The Act is also to contain a specification of consequences that the developer will bear if the noticed defect is not removed within the time limit set by the consumer.

All new measures that result from the entry into force of the Act on Protection of Rights of Buyers of Residential Units or Single-Family Houses, as well as from the establishment of the Developer Guarantee Fund, also entail increased bureaucracy. All these processes will certainly require a number of procedures, appropriate reporting and archiving of documentation. This entails incurring additional costs, which in turn may translate into higher housing prices. Is this really necessary? In my opinion, no. I would venture to say that it is an artificial creation of posts, an additional administrative burden and an additional hour of paperwork.

Any initiative that aims to protect residents is most welcome. However, they must be well thought out so as not to harm the interests of others – in this case, developers, and above all, to respond to the real needs and problems of customers and the real estate industry.

Robert Stachowiak, President of the Management Board of the property development company SGI